Under IRS Notice 2017-48, issued on September 5th, the IRS announced guidance on the treatment of leave-based donation programs designed to spur charitable relief donations to aid victims of Hurricane Harvey and Tropical Storm Harvey.
Under traditional leave-based donation programs, employees are allowed to donate accrued vacation, sick or personal leave (“PTO”) in exchange for payments made by the employer to charitable organizations. IRS regulations require employees making leave-based charitable donations to include the value of the donations in the employees’ income.
Under, the guidance provided by the IRS under IRS Notice 2017-48, as long as donations are made prior to January 1, 2019, and are made to charitable organizations described in Section 170(c) of the Internal revenue Code for the relief of Hurricane Harvey and Tropical Storm Harvey victims, employers may contribute the cash value of the PTO donated by their employees, and the contribution won’t count toward the gross income or wages of the employees, while the employers will be allowed to deduct the cash payments as business expenses (as opposed to having to treat the contribution as a charitable donation). Electing employees, however, may not claim a charitable contribution deduction relating to the value of the forgone PTO excluded from wages. There is no need for this since the donated leave will have already been excluded from the employee’s income.
The IRS provided similar relief following Hurricane Katrina in 2005, Hurricane Sandy in 2012, the Ebola outbreak in West Africa in 2014, and last year following Hurricane Matthew and severe flooding in Louisiana. It is expected that the IRS will offer similar relief to aid victims of Hurricane Irma.